In the United States
, the limited liability company (LLC
) is a relatively new business structure
compared to the other business structures
(it became popular at the beginning of this century). It is a hybrid
between a general partnership
and a corporation
, and offers the best
features of the both
. A limited liability company is formed by the consent
of its member-owners. The company must file articles of organization
to the state
in which it operates. The state authorizes the organization of the firm by issuing a charter
. A limited liability company is viewed as a legal entity
apart from its member-owners.
- The main disadvantage of an LLC is the lack of uniform laws across the states. If an LLC decides to expand to another location in a different state, the firm must review the laws of the state to ensure that the LLC complies with all the rules of the new state of operation.
- Since the LLC is a relatively new invention, some creditors may not be familiar with the business structure and might be less willing to give out loans to the company.
- There is the limitation in that people who would invest as shareholders are thrown by the term "membership", which is what they would have in the LLC rather than a "share".
Basically, there are few, if any, disadvantages to an LLC. The current disadvantages will be phased out as people and the business world become more familiar with the LLC.
Kurt: Thank you very much for the insights and good points.
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